Last week justice came to two companies that had been swindled out of millions of dollars that had been earmarked to buy bitcoin when Barry Thompson also known as J. Barry Thompson pleaded guilty in Manhattan court to commodities fraud.
According to an order entered in the Southern District of New York, in 2018, Thompson induced two companies to send more than $7 million to purchase bitcoin after making false representations that he would not release the funds until he had control of the bitcoin they were seeking to purchase. But Thompson sent nearly all of the money that was to fund the purchases to a third party without first having the bitcoin under his control. Thompson took the customers’ money and failed to provide the Bitcoin in exchange. Then he lied to the companies about the status of the Bitcoin, and the reasons why the transaction was not completed, among other things.
Thompson was arrested on July 25, 2019 and charged with two counts of commodities fraud and two counts of wire fraud. In September, the U.S. Commodity Futures Trading Commission charged Thompson with knowingly or recklessly making false representations to customers in connection with the purported purchase of bitcoin worth over $7 million. In a complaint filed in the United States District Court for the Southern District of New York, the CFTC alleged that contrary to the false statements made by Thompson, neither he nor his company had possession or control of the bitcoin that was to be delivered to his customers.
Before the feds were involved, Thompson’s bad acts led both companies to bring civil actions. One of those actions landed in federal court in Pennsylvania. In that case, the plaintiff decided to withdraw the complaint it had brought and, instead, reached a private settlement with Thompson. But Thompson breached the agreement by failing to make the first settlement payment.
Attorney Daniel Alter who represented the plaintiff in that case said, “once the federal prosecutors from the SDNY and the CFTC enforcement lawyers became involved, I felt confident that Thompson would finally face justice.”
This case is one of the early ones. Attorney Alter believes that more are to follow. He states “civil litigation involving cryptocurrency disputes are on the rise and will skyrocket. We are ready for it.”
The court imposed injunctive relief and restitution of approximately $7.4 million to the two companies, and enjoins Thompson from any further violations of the Commodity Exchange Act or CFTC regulations, as charged. The order also permanently bans Thompson from registering with the CFTC, from trading any commodity interests, and from trading bitcoin for any account in which he has an interest. Thompson is scheduled to be sentenced Jan. 7; the charge carries a possible maximum sentence of 10 years in prison.